A. Equity Funds

  1. Any fund which has more than 65% invested in equity is known as an Equity fund. For example, small-cap funds, large-cap funds, balanced funds (equity-oriented), etc.

  2. Long-Term Capital Gains (LTCG) will be 10% if the units are sold after 1 year of allotment (if your capital gains are more than 1 lac a year) - This is grandfathered till 31 Jan 2018. Meaning, whatever you gained until 31 Jan 2018 are tax-free. Only further gains will be taxed at 10%. For more info click here.

  3. Short Term Capital Gains (STCG) of 15% will be applicable if the units are sold within 1 year of allotment.

  4. Dividends received in excess of Rs 10 lacs, will be chargeable at 10%.

  5. Long-term capital loss can only be offset against LTCG.

  6. Short-term capital loss can only be offset against STCG or LTCG.

B. Non-Equity Funds

  1. Fund whose Equity investments percentage is less than 65% are Non-equity funds. For e.g.: liquid schemes, debt schemes etc.

  2. STCG will be applicable as per the tax bracket.

  3. LTCG (for non-equity product LTCG is 3 years above) will be applicable at 20% after indexation. The Long-term capital gains (LTCG) over Rs 1 lakh on listed equity shares per financial year is taxable at the rate of 10% without the benefit of indexation. Indexation means to adjust the cost of purchase as per the inflation index number which is released by the government every year. Let's say, you purchased a unit at Rs 50 in 2012-13 and sold the unit at Rs 100 in 2018-19. The cost inflation index is 200 for 2012-13 and 280 for 2018-19 respectively. Then the indexed cost of acquisition (50*280)/200 is Rs 70. The capital gains post indexation is Rs 100 - 70 = Rs 30 (instead of 100 - 50). So, a 20% tax on 10 is Rs 6 per unit.

  4. Dividends from non-equity schemes will be given after deduction of Dividend Distribution Tax (DDT) which is 28.84%. In this case, it is best to invest in a growth-oriented scheme.

  5. Short-term capital loss can be offset against STCG or LTCG.

  6. Long-term capital loss can only be offset against LTCG.

In both cases, the capital loss cannot be balanced against any Income Head.

Keep in mind : The information above is applicable under the current taxation rules and could be subject to changes. Do consult a chartered accountant (CA) before filing your IT returns. For more information click here.